A major home-lifting contractor ran a private sting operation in Meraux a few weeks ago, allegedly caught seven of its competitors on video violating federal grant rules and got them suspended from the $750 million Hazard Mitigation Grant Program. The secret recordings, captured by a salesman from Orleans Shoring, are now part of a criminal investigation.

View full sizeJohn McCusker, The Times-PicayuneSeveral elevation firms in the New Orleans area found out through a press release from the state Office of Community Development stating they have been suspended from state work. Jeremy Patterson, owner of Patterson Structural Moving Shoring, went to the Hazard Mitigation Grant Program office at the New Orleans lakefront to try and get answers. He was asked to leave by office manager Lacy Allen, right.

It's the latest bizarre turn for a federally financed program beset by shoddy contractor work and allegations of fraud by current and former state officials.

Late Friday, the state suspended the seven firms targeted in the sting on suspicion of "serious misconduct," pending the results of an investigation. They are: Cajun Elevation and Shoring LLC, of Metairie; Cumberland Investment Group LLC, also known as CIG, of Metairie; Elevations Shoring, of Kenner; Fusion Construction Inc., of Marrero; NTP Construction LA LLC, of New Orleans; Patterson Structural Moving and Shoring LLC, of Slidell; and RamJack Foundation Solutions of Louisiana, now doing business as Foundation Elevation and Repair.

Representatives of those companies say they still haven't been told why they were suspended, and the state has declined to give any more details.

But Christian Cancienne, owner of Orleans Shoring, acknowledged that his company set up the sting using the home of one of his salesmen.

"We were tired of the widespread corruption in the program," Cancienne said. "Our clients have been telling us that the other guys were willing to forgive their promissory notes. We tell them that's illegal, but these other sales guys are so convincing. We told the state, but they always said we had no proof. We were tired of it."

Cancienne said his salesman Steve Baker used his house, pretending that it was eligible for a hazard mitigation grant. The Bakers told the various competing salesmen that they needed help paying for the job, because they had already spent a portion of a $30,000 Road Home grant that, by law, must be used to help pay for the elevation work.

Cancienne said at least two of the contractors offered to bump up the home's square footage to get a larger grant, and three of them even acknowledged on tape that forgiving promissory notes was illegal. "They said, 'I know it's a felony' -- they used that word -- 'but the state will never catch it,'" Cancienne said. "It's that blatant, and that's why the state suspended them."

View full sizeJohn McCusker, The Times-PicayuneOrleans Shoring works a job Monday on Tracy Street in St. Bernard Parish.

The videos are now part of a state fraud investigation, a source close to the probe told The Times-Picayune. The source said at least one of the seven contractors offered to doctor the square footage of the home to artificially increase the federally financed grant amount.

Cancienne, whose Orleans Shoring controls more grant projects than anyone in the state, said his company has set up several stings, or "secret shops," using its sales people as fake Road Home recipients. He said Baker set up cameras and recording equipment around his slab-on-grade ranch house in Meraux and captured 13 shoring companies bidding on the elevation work.

When the Bakers told the salesmen that they had only $20,000 left from their $30,000 Road Home elevation grant, Cancienne said seven of the 13 contractors were caught on tape offering to forgive promissory notes for the spent Road Home money. Cancienne said some also offered incentives such as artificially inflated grants, a larger porch or a driveway.

The state has warned homeowners and elevation contractors that forgiving promissory notes and offering incentives is federal fraud.

The owners of the various suspended firms were irate to learn that a private company had set up the sting and the state wasn't letting them answer the charges before suspending them. The Bakers signed contracts with a number of the companies targeted in the sting but are not qualified under the program and had no intention of starting work.

"It's craziness that Orleans Shoring went to these lengths to put their competition out of business," said Randy Gaspard, owner of CIG, which decided to execute its contract with the Bakers and started lifting their house last week. Orleans crews went in behind CIG and refilled the holes under the home Monday, and Gaspard claims Orleans stole some of his material. Cancienne said that's not true.

Gaspard said he offered to raise the Bakers' home for $130,000 on Oct. 10, but the Bakers asked if he could do it for $120,000 and he agreed. Initially, an employee of the grant program told him the Bakers' house did not qualify for a grant, but Kathy Baker told him the grant was in her late mother's name. Gaspard said Baker had an employee of the program call him and tell him the home qualified.

"We did a promissory note for $30,000. She told me they only had $20,000 of the Road Home grant left, so I told her that when I finish the job, if you give me a lump sum of $20,000 that you told me you have, I'll forgive this promissory note," Gaspard said. "I didn't give a forgiveness note to anyone, and if they hadn't paid the lump sum they would have had to pay the whole note."

State spokeswoman Christina Stephens said there was no record of anyone from the program calling Gaspard about the Baker house, "but we're having the Attorney General's Office look at this entire situation to investigate anywhere that there was fraud."

Jeremy Patterson, the owner of Patterson Structural Moving & Shoring and erstwhile reality television personality, said his salesman agreed to do a new driveway at the house, but it's marked on the contract as an out-of-pocket expense for the homeowner, not a freebie.

"We don't believe we did anything wrong or anything illegal," he said.

Patterson went to the program offices at the University of New Orleans to get more information Monday. Office manager Lacy Allen told him they had no further information for him.

"Look at it from my side," Patterson said to her. "You're destroying my family."

Allen then asked Patterson to leave.

"It's over," said Patterson's general manager, Daniel McKearan. "Honestly, I don't even know why Jeremy is here. He should be back at the office figuring out how to close his business. The damage is done. The suspension ran on the news in Lake Charles, where a lot of our business is. They're all going to cancel, and we don't even know what we did wrong."

Praveen Kailas, owner of Cajun Elevation, said the state still hasn't confirmed to him that his firm is suspended. He said he only read about it in the newspaper.

"We are continuing to work as normal, and we have no intention of slowing down our projects or stopping," Kailas said, declining to comment further on the allegations.

Before the state made it clear that contractors couldn't offer incentives to get homeowner contracts under the program, Kailas' firm had a television commercial offering free cruises to families who hired Cajun. He said he stopped when the state cracked down and has a clear policy against his sales people offering any incentives.

Keith Bellaci of Elevation Shoring said his sales staff may offer to help homeowners, but he reviews all contracts and won't allow any to go through if the homeowner can't pay. He said his sales people signed a contract for the Bakers' house in Meraux two weeks ago, but he never sent it to the state because he didn't like the fact that the homeowner was short some of the Road Home money.

Don Rouzan, an attorney for NTP, said his firm has still not been informed of any allegations by state officials. "Until we hear from state agencies associated with this we cannot respond, but as far as NTP is concerned, they've followed all rules of the program at all times," he said.

The suspended contractors also questioned Orleans Shoring's involvement in their suspension. They noted that the firm's attorney, state Sen. Julie Quinn, was instrumental in pushing for other changes in grant program rules that are likely to limit the number of firms that can participate.

"Orleans Shoring is running this show, and nobody is doing anything about it," Bellaci said. "We've got a state legislator changing the rules, imposing bonding requirements to eliminate the minority contractors. How is that even legal?"

Once The Times-Picayune broke news of the sting Monday, the state put out a press release announcing that the program was partnering with the Louisiana State Police to conduct its own undercover operations.

State listed firm name wrongly: The state suspended "RamJack Foundation Solutions of Louisiana LLC" from the Hazard Mitigation Grant Program. The state took that action after a salesman who used the RamJack name was caught on video breaking program rules. But a lawyer for Ram Jack Systems Distribution LLC, an Oklahoma company that licenses the Ram Jack trademark and its foundation repair systems, said the Louisiana firm was not authorized to use the Ram Jack name and dropped it from state corporation records in January 2010. Richard Sykes of Durham, N.C., who co-founded RamJack Foundation Solutions of Louisiana LLC and now operates a successor company called Foundation Elevation and Repair LLC, is an authorized Ram Jack dealer in North Carolina but was never permitted to use the the Ram Jack brand as an entity name in Louisiana.